Opportunity
The Qs are testing Tuesday’s lows as we approach
midday as the bears remain in control and every mini-rally continues
to get sold into resistance. What does this mean for daytraders? Opportunity,
both in terms of beautiful contra-trend scalps, as well as low-risk trend
continuations. At the risk of sounding like a broken record, the hourly trend
remains down with a sharp trend support angle which continues to provide a
strong lid and served as an outstanding guide on the morning contra-trend
triggers. Having said that, the hourly stochastic reading is growing in
importance as we measure the true strength of today’s decline to yesterday’s
lows. Also keep an eye on longer-term Fibonacci retracement levels as mentioned
in Kevin’s
column in recent days. While I don’t specifically use Fib targets, I do find
them helpful supplemental information in such extreme markets.
Wednesday February 20,
2002 11:15 AM EDT
The last few days have provided yet more evidence
of why it’s imperative to combine momentum indicators such as stochastics with
trend indicators vs. stochastics on a stand-alone basis. If I had a nickel for
every time I’ve heard that a sub-20 band reading, or a %K cross over %D triggers
a reversal signal, well, as they say, I’d have a pile of nickels. While the
sub-20 myth is easier to dispel by simply pulling up historical charts showing
stochastics scraping along near the zero band in extreme markets, yesterday’s
13-minute chart shows why I chose long ago to use trend indicators vs. a %K/%D
cross to gauge the final turn in tide.
Good Trading!